Frugality Hype Can Overshadow Meaningful Financial Discussions
I find it amazing that many of us go to bed earlier than we want, get up way earlier than we want, travel further than we would on a day off, all to get to get to some place we would generally choose not to be—work. We then spend the majority of our waking day furthering an economic interest that is far greater than ours, all so that we can provide for our families and ourselves. Then, interestingly, the extraordinary effort that goes into making every single dollar we earn is quickly forgotten when it comes to spending and planning for our futures. We easily get caught up in the recent craze of frugal living tactics like changing to energy efficient light bulbs, bringing our lunch to work, and making coffee at home. However, there is little glamour surrounding such issues as proper portfolio allocation, avoiding non-tax efficient debt, and proper emergency fund size. In my opinion, these are the issues that deserve more attention because their implications tally hundreds of thousands of dollars over a lifetime—a far cry from savings attributed to proper air tire pressure and it’s relation to gas mileage.
The frugal living craze has done a lot of good things to improve consumer spending habits, but it has put an importance on immediate and often minimal savings over long-term financial goals. For example, the majority of us spend hours running around town buying goods from multiple stores that have the cheapest prices, but spend only minutes deciding on investments that determine when and if we retire. We can refuse to go to a concert because the Ticketmaster fees cost 15 % of the total ticket, but could care less about choosing an investment with a high expense ratio that could cost us hundreds of thousands of dollars.
We also have the habit of associating certain debt and costs as socially necessary, regardless of our financial needs. For example, taking out a home equity loan to overdue a home remodel or borrowing thousands for a private college degree, which is arguably worth the same as a local state college. Again, such issues are generally not taken up at the water cooler at work, but probably should be. When it comes to making important decisions that substantially affect our economic futures, people simply do not discuss these issues with others, largely in part because decisions of such magnitude make people uneasy and insecure.
Generally, daily frugality topics dominate discussions at home as well. For example, it’s ironic that a couple will debate and argue about the best economical thermostat setting in their home and almost always choose one that puts them a few degrees past their comfort level just to save a few dollars. Thus, almost guarenteed are continuous arguments about keeping the home too cold or warm, however, this same couple probably spend no time reading the details of a home mortgage loan, arguably the biggest investment decision of their life.
Perhaps spending a few extra dollars a week on indulges that truly make us happy is well worth the price and spending a few extra minutes making big picture money decisions is what we should really should be worrying about. Although this message goes against many of the daily ways to save money we preach about, it’s important to remember that we spend the some of the best years of our life working hard and only a few minutes making some of the most important financial decisions of our life.
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Comments
I so disagree with this. I think small steps to save money and large ones go together. “this same couple probably spend no time reading the details of a home mortgage loan…” How do you know this? Is it not possible that becoming frugal in small ways like putting in cfls and setting their thermostat inspires them to make larger changes and look for other ways to make a difference? Of the people I know, most have found saving addictive. Once they dip their toe in and find out how little it takes to start making a big difference, they start looking for more and more they can do. Frankly, from what I hear on the news practically no one is getting loans anymore, let alone home equity loans. People are knuckling down and saving. This may pass when the economy gets better, but many habits will stay.
If small steps to saving leads people to make larger and smarter money decisions that’s great, but its a little naive to believe that the majority of people understand where their money is invested for example, because the majority of us don’t even invest. It’s true that now more people are watching the news and saying things like, “this whole problem was people living beyond there means.” Well that’s great that people realize this, but I doubt hardly any of them would consider themselves of those “people.” Your point of saying habits will stay is true, and the majority of us have a habit of ignoring our financial futures and that will continue if we don’t discuss it, and that was my point.
Finally, the voice of reason! I couldn’t have said it better myself. I am so tired of reading all these personal finance bloggers who brag about their “alternative stream of income,” meaning, they “earn extra income” by spending 25 minutes filling out an online survey so they can get $3.
People get too immersed in small savings, when the same time and effort spent on bigger things, like saving money on car insurance, homeowner’s insurance, the mortgage, etc. would net much bigger results.
I’m not saying you couldn’t do both, but again, far too many people out there are obssessed with silly little surveys that just sap your time but let you pat yourself on the back for earning a measly dollar, probably becus they don’t have the imagination or initiative to do something bigger.
Frank,
You described in detail the biggest financial mistakes I’ve made over the past 2-3 years.
I enrolled in a small private college after high school, but did not give nearly enough time to the financial implications of borrowing so much money for school. Funny thing was; I was being extremely frugal at the time. I did tons of little things to save a dollar here and there, which certainly helps, but I neglected to seriously consider the costs of school. It’s going to take a lot of generic cereal and hypermiling to make up for the student loan debt that is still accumulating. 
I agree with the article. But even this article ignores and does not inform. When will we truly inform the public!
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